State economy stirs in some sectors
Colorado’s economy continued to show signs of improvement so far this year thanks to a boost in tourism, a robust agricultural market and some recovery in the energy industry, state economists said Monday.
Nonfarm employment in the state and consumer spending have begun to increase at rates faster than the rest of the nation, signaling that the state’s economy is gaining momentum, said Natalie Mullis, chief economist for the Legislative Council.
Despite that, however, there are still some parts of the state’s economy that are resisting recovery, including slow growth in small and medium-sized businesses because of tight credit and a struggling real estate market, she said.
“We still have expectations for a growing economy with lots of evidence for a real economy that is beginning to get solid footing and gain momentum,” Mullis told the Legislature’s Joint Budget Committee. “We also have evidence of a lot of imbalances in the economy that is going to slow that growth over the next several years.”
State revenue is expected to be about $179 million higher by the end of the next fiscal year, which will begin July 1. That will mark the first time since 2008 the Legislature won’t have to cut the budget to bring it into balance.
The increase also means the state can go ahead with a plan to allocate an additional $67.5 million to public schools for the next fiscal year, mitigating the overall budget cuts to K–12 from $225.5 million to $160 million.
But while Colorado’s economy is starting to find its feet again, recovery for the Western Slope remains elusive, Mullis said.
Unemployment in the region has fallen slightly, but it’s happening at a time when energy drilling has leveled and construction activity remains virtually nonexistent, she said.
The only other good sign for the region was in consumer spending, she said. After posting a 19.1 percent drop in sales in 2009, the biggest decline of all areas of the state, consumer spending stabilized last year and now shows an upward trend.
Henry Sobanet, director of the Office of State Planning and Budgeting, agreed with Mullis’ outlook, but pointed out the state still has a way to go to make up the losses of the past few years. He said while state revenue is expected to be up in 2012 compared with this year, it’s still about $355 million under what it was in 2008 when the recession began.
Sobanet said “negative forces” weighing on the economy and high foreign debt on the global market could stall the state and U.S. economies.
Rep. Mark Ferrandino, D-Denver and a Joint Budget Committee member, said while the overall news may be promising, people need to remember that next year’s estimated surplus is based on billions of dollars in cuts in the past three years.
“While we’re seeing more revenue, that doesn’t include case load growth, it doesn’t include (education spending) forecasts and other statutory provisions,” he said. “Most likely as we look forward, we will still be having to cut in 2012–13 and making significant difficult decisions.”
Mullis said a major part the economy’s inability to fully recover continues to be because of the state’s housing market. She said that will continue to be a drain on the economy for three to five years, saying that while foreclosures have lessened in recent months, they still are at abnormally high levels.
“What we have right now is a housing market that is in a very nervous state of disequilibrium,” Mullis said. “You have a lot of people out there looking for a house, you’ve got a lot of houses that have been on the market for a long time, but no one is buying. Either they can’t find the credit because the credit market for potential home buyers is still very, very tight, or the homeowner’s not willing to drop the price far enough to actually get the house to sell.”